10th Circuit Upholds SEC Sanctions on Oklahoma Broker

(CN) – The Securities and Exchange Commission reasonably barred Keith Geary, CEO of Geary Securities, from ever holding another principal role at a financial services firm after he committed an “egregious” violation of net capital rules, the 10th Circuit ruled.

Keith D. Geary, former CEO of Oklahoma-based brokerage Geary Securities, was sanctioned by the Financial Industry Regulatory Authority for violating rules requiring a broker-dealer maintain at least $250,000 of net capital if it receives checks from customers.

In 2009, Geary agreed to purchase $77 million in collateralized debt obligations while the firm held only $1 million in net capital.

When the clearing firm issued a $31.8 million margin call for the purchase, Geary was unable to meet the call or find financing to avoid the capital violation.

As a sanction for his conduct, FINRA barred Geary from acting in a principal role with an FINRA member firm, suspended him for 30 days, and fined him $20,000.

Last year, the Securities and Exchange Commission (SEC) affirmed the disciplinary action taken against Geary, and the 10th Circuit declined to review the finding.

“In holding that significant sanctions were warranted, the SEC noted Mr. Geary’s troubling attitude’ regarding regulatory compliance, his display of ‘a disturbing lack of understanding and ignorance of FINRA rules,’ his repeated failure to heed warnings regarding protecting GSI’s capital, and ‘concerns about his ability to comply with regulatory requirements generally,’” U.S. Circuit Judge Carolyn McHugh said. “Because Mr. Geary continues to work in the securities industry, the SEC decided that an all-capacities suspension was appropriate to impress on him the need to comply with regulatory requirements, rather than addressing violations after they occur.”

The court also upheld the agency’s finding that Geary’s conduct was “egregious,” and that he was directly responsible for the net capital violations, factors that outweighed mitigating factors such as his lack of a disciplinary history.